In early August, Wired reporter Mat Honan had his most precious passwords hacked via a complex series of social engineering exploits. The breach made headlines because it exposed security flaws in Apple and Amazon customer service policies; but let’s not forget that the Honan saga capped a long summer full of server invasions that exposed millions of user passwords en masse.

In June, hackers stole some 6.5 million LinkedIn passwords and posted them online. That same month, intruders compromised about 1.5 million eHarmony passwords in a security breach, and in July hackers grabbed 450,000 Yahoo Voice passwords. Among the most common passwords used by those Yahoo members: "123456," "welcome," and the ever-popular "password."

The fundamental problem isn’t that these sites should have done a better job protecting user data (though they should have). And it isn't that users chose passwords that were exceedingly easy to crack and then recycled the same flimsy passwords at every site where they registered (though they did).

The problem is that passwords have become self-defeating, often impotent tools in the grand scheme of digital security. We need too many of them, and the strong ones are too hard to remember.

“To use the Net these days you have to have dozens of passwords and logins,” says Terry Hartman, vice president of global security solutions for Unisys. “Every time you go back to a site, it feels like they’ve introduced new rules to make passwords more complex. Eventually, users revert to using one password for everything.”

In short: The password system is broken. All of the passwords breached in the LinkedIn, eHarmony, and Yahoo exploits had been "hashed"—that is, the actual passwords had been replaced with algorithmically generated code. This transforms the passwords stored on servers (and stolen by hackers) into alphanumeric gobbledygook. Still, if your password is as simple as, say, "officepc," a hacker can easily crack it even in hashed form by using brute force or a rainbow table.

But all is not lost. Complex passwords infused with numbers and special characters (and bearing no resemblance to a real name or word) give you a fighting chance against hackers, and you can store these codes in a handy password management app. Websites, meanwhile, are doing more to beef up security at their end, requiring multifactor authentication, and it looks as though biometric technology will soon be employed for mass-market security as well.

The password problem won’t go away any time soon, however, and for now we’ll have to rely on the applications, services, and emerging technologies explained below to stay one step ahead of the bad guys.

Password vaults Password management programs are like spam filters—boring but essential tools for managing your digital life. A good password manager remembers all of your logins, replaces the simple passwords you choose with complex ones, and lets you change those passwords quickly if a site or service you use gets hacked.

The best part: Instead of having to remember dozens of unique passwords, you only have to remember one: the master password for your vault. And unless you always log on from the same machine and the same browser (in which case you’re probably reading this on an AOL dialup connection), you’ll want a cloud-based program like LastPass, 1Password, or Roboform that can apply your logins to any PC, phone, or tablet you use.

The downside: You still have to remember your master password, and it really should be a good one, packed with a mixture of numbers, capital and lowercase letters, and special characters such as question marks and exclamation points.

Of course, an attacker who manages to plant a keylogger in your system will be able to sniff out your password as you type it, notes Robert Siciliano, an online security expert for McAfee who uses a password vault to store more than 700 logins. Similarly, if crooks hack a cloud-based password vault—as happened to LastPass in May 2011—it could be game over. Fortunately for LastPass customers, no sensitive information was breached in the 2011 attack; but the next time a successful intrusion occurs (and that it will happen to some security firm somewhere is inevitable), users might not be so lucky.